Friday, April 23, 2010

Every parent is concerned with whether his or her child has what it takes to succeed in life. We obsess over reading and speaking skills, counting, and how our children interact with us and others in their lives. Parents secretly (or not so secretly) revel in their childrens' achievements, and marvel at their talents and intelligence. What many parents may not understand however, is that their child's talents and intelligence are largely at the mercy of their self control.

Self control refers to a child's ability to discern right from wrong, and to exert control over his or her own actions. Seminal experiments on self control in children were conducted in the late 1960s by a psychologist named Walter Mischel. His first experiments in the field took place in Trinidad in 1955, where he lived in a part of the island that was evenly split between people of East Indian and African descent. In discussions, the East Indians described the Africans as "impulsive hedonists, who were always living for the moment", and the Africans claimed the East Indians "didn't know how to live, and would stuff money in their mattress and never enjoy themselves".

Mischel took children from both groups and offered them a choice: either they could eat a small chocolate bar right away or, if they waited a few days, they would get a much larger bar to eat. Mischel discovered that the ethnic stereotypes did not hold with the 4-year-old children. Instead, he found that variables such as whether the children lived with their father were better predictors of self control. These initial experiments sparked a lifelong interest in the development of self control, and how this personality trait predicts success in school and life.

The Marshmallow Experiment

Mischel is probably best known for his 'marshmallow experiments', in which over 650 4-year-olds were invited, one at a time, into a controlled setting and presented with a tray of treats. Similar to the original experiments in Trinidad, a researcher on Mischel's team told each child that they could ring a bell at any time, at which point the researcher would offer the child one treat, such as a marshmallow or cookie. The child was also told that if he or she waited 15 minutes for the researcher to return, he would be given 2 treats.

The researchers observed and recorded the children on video as they tried to resist the treats. Some of the children covered their eyes, others played with their hair, or played hide-and-seek under their desk. One devious little boy grabbed an oreo, parted it, licked the icing from the center, and neatly placed the cookie back in the tray. The average child resisted the treat for about 3 minutes. A few children ate the treat right away without even ringing the bell. However, about 30 percent of the children managed to resist temptation, and waited for the researcher to return.

Upon reviewing hundreds of hours of observations from these types of experiments, Mischel drew some important conclusions. His initial conclusion was that the children who resisted temptation were experts at what he called 'strategic allocation of attention'. Rather than focusing all their attention on the delectable treat, the children that resisted the treats were more often the ones who covered their eyes, played games, sang songs, or otherwise occupied themselves while they waited. "If you're thinking about the marshmallow and how delicious it is, then you're going to eat it," says Mischel. "The key is to avoid thinking about it in the first place". Mischel was convinced that children with a better understanding of how to focus on something else displayed much better self control behaviour.

How important is this quality of self control? Scientists including Mischel have conducted several longitudinal studies based on the results of the early childhood studies. In reviewing the data from follow-ups, researchers have shown that adults who demonstrated poor self control as children were more prone to higher levels of obesity, and were more likely to have problems with drugs. As high-school students, they are more likely to have behavioural problems at home and in school, and they found it harder to form and maintain friendships. Perhaps most interestingly, the children who waited the 15 minutes for the extra treat scored, on average, more the 200 points higher on their SATs in high-school.

Self Control Can Be Taught

Now for the good news. Though some children naturally exhibit self control more than others, it turns out that the behaviours that support a child's ability to succeed in school and life can be taught. According to Mischel, "What's interesting about 4-year-olds is that they are just figuring out the rules of thinking. The kids who couldn't delay would often have the rules backwards. They would think that the best way to resist the marshmallow is to stare at it, to keep a close eye on the goal. But that's a terrible idea. If you do that, you're going to ring the bell before I leave the room." However, when Mischel and his team taught the kids some simple 'mental transformations', such as pretending that the treat was just a picture surrounded by an imaginary frame, imagining it as a small pet that must be stroked and cared for, or picturing a marshmallow as a cloud, self control improved dramatically. "All I've done is given them some tips from their mental user manual," says Michel. " Once you realize that will power is just a matter of learning how to control your attention and thoughts, you can really begin to increase it."

Parents teach these skills naturally, but it pays to be mindful and actively provide opportunities for children to learn these skills. Mischel provides some helpful advice for parents: "This is where your parents are important. Have they established rituals that force you to delay on a daily basis? Do they encourage you to wait? And do they make waiting worthwhile?" Even simple lessons like not snacking before dinner, waiting until everyone is finished before leaving the dinner table, taking turns with toys, saving allowances, or holding out for Christmas morning can reinforce important qualities of self control. Modeling is important too, especially for young children, so parents should make a show of waiting in line, or passing on snacks or dessert.

Patience and Self Control Are Also Important For Investment Success

This is primarily an investment blog, so I would be remiss if I did not include a lesson for investors. One obvious lesson relates to saving techniques. Clearly it is much easier to save money every month if the savings come out of your account, or off your paycheck, automatically so that there is never an opportunity to spend in to an immediate 'treat'. We strongly advocate this 'pay yourself first approach' to clients who are saving for a specific goal, such as retirement or a child's education, and it has proven its efficacy many times over.

Another less obvious take-away relates to how often a person checks his or her investment portfolio. A portfolio with an allocation to stocks is necessarily constructed to meet a longer term goal, as the performance of stocks is erratic in the short term. However, clients insist on checking their portfolio values on a weekly, daily, or even intra-day basis. This is a very bad idea, as the ups and downs in the portfolio balance out over time, and are meaningless on short time scales. In fact, investors that check portfolios every day will see about 4.5 times as much portfolio variability as investors who check every month. The chart below shows how an investor's anxiety, as a function of the swings he observes in his portfolio, increases exponentially with the frequency of his observations.

Source: Butler|Philbrick & AssociatesNote: Graph represents the theoretical increase in observed volatility due to more frequent observations of portfolio value according to the equation: perceived vol (time horizon 2) = perceived vol (time horizon 1) * square root (number of periods in time horizon 2 / number of periods in time horizon 1). The y-axis shows the magnitude of the increase in observed portfolio variability, with annual observations given a factor of 1.Chart is for illustrative purposes only.

Investors would be well served by performing a great deal of due diligence as early as possible in their investment horizon in order to find an investment strategy that they are confident in, and can commit to over a very long period of time. (Click here, here, and here for evidence that Buy and Hold is NOT a smart strategy to stick with, and click here, here and here for a compelling alternative). Once that commitment is made, investors should follow the strategy with discipline, and ignore the day-to-day media circus and market gyrations, as they will lead to higher anxiety at best, and poor investment performance at worst.

Conclusion

In conclusion, the ability to exercise self control is highly predictive of success in school and life, and is perhaps more important than general intelligence level, as it controls how we channel that intelligence. Children who are taught the skills necessary to shift their strategic attention in order to delay gratification exhibit healthier behaviour and stronger academic performance in high school. Adults who practice delayed gratification are better savers, focus less on the short-term performance of their portfolios, and have a much better chance of achieving their financial goals.

Sunday, April 4, 2010

The last few posts (here and here) have injected a dose of reality into the debate around future return expectations for 'Buy and Hold' investors. Markets have been expensive for over 80% of periods since 1994, and never reached the genuinely low valuations associated with secular bear markets, even at the depths of 2003 and 2008-9. By most traditional measures, stock markets around the world currently range in valuation from above average (UK) all the way up to nosebleed (China). Returns to a buy and hold strategy consisting of global stocks from these lofty valuations are unlikely to be robust, and may actually be negative over the next 10 years or more.

We believe that investors need not be held captive to the common buy and hold doctrine preached by mutual fund companies and banks. These institutions are motivated to keep investors locked into homogeneous mutual funds and managed account products. This benefits banks and fund companies because they are able to charge more for stock mutual funds (or managed accounts) than bond funds, despite abundant proof that most managers add virtually no value. Not surprisingly, the Buy and Hold approach requires the least amount of effort, training, or skill, and offers investors virtually no accountability. It does, however, advocate constant exposure to stock mutual funds under any and every market condition.

We assert that cap-weighted buy and hold is just one of a variety of broad investment strategies, albeit the one most commonly embraced by adherents to the dominant investment paradigm. Unfortunately for these adherents, the dominant investment theory does a very poor job of describing actual market behaviour, especially over time horizons that are meaningful for most investors. So what is an investor to do?

The Trend-Following Alternative

There are many alternatives to cap-weighted buy and hold, but the strategies that we feel hold the most promise for investors can be broadly described as 'trend-following'. Although trend-following is an investment strategy with strong empirical roots, it is helpful to think of it as a natural extension of actual human behavior. For many years, scientists in disciplines as seemingly unrelated as evolutionary anthropology and modern psychology have demonstrated that humans are prone to the same herding instincts as other animals. When faced with a choice in the absence of trusted information, humans will usually choose to follow the crowd rather than act against it. Many can relate to the experience of choosing a restaurant in a foreign city. Even when presented with several positive reviews of a restaurant from trusted official sources, people will often choose not to eat at that restaurant if it is empty, especially if a restaurant next door is full. They will usually follow the crowd into the busy restaurant, even at the expense of waiting for a table, rather than eat at the well reviewed but empty one.

A couple of years ago, psychologists at Columbia University performed an experiment to test the power of social herding. They set up an online music exchange, dubbed MusicLab, where over 14,000 participants registered to listen to, rate, and download songs by a variety of bands they had never heard of. Some of the participants saw only the names of the songs and the bands, while others, in what the experimenters called the 'social influence' group, were also shown which songs were most highly rated by others, and/or most frequently downloaded. The 'social influence' group was further divided into 8 separate 'worlds'. Participants in each world could see only the ratings and downloads of others in their world.

One of the researchers, Duncan Watts, explained the setup and their observations in a 2007 New York Times article:

"This setup let us test the possibility of prediction in two very direct ways. First, if people know what they like regardless of what they think other people like, the most successful songs should draw about the same amount of the total market share in both the independent and social-influence conditions — that is, hits shouldn’t be any bigger just because the people downloading them know what other people downloaded. And second, the very same songs — the “best” ones — should become hits in all social-influence worlds.

What we found, however, was exactly the opposite. In all the social-influence worlds, the most popular songs were much more popular (and the least popular songs were less popular) than in the independent condition. At the same time, however, the particular songs that became hits were different in different worlds... Introducing social influence into human decision making, in other words, didn’t just make the hits bigger; it also made them more unpredictable."

So how does this relate to investment trend-following? Trend following recognizes that one of the most powerful forces in human decision making is 'social influence', and actively takes advantage of this human condition. We see trends in fashion, eating, lifestyles, religion, education, child-rearing, baby names, car colours, medical surgeries, traffic, and almost everywhere else you might look in human society. These trends show up in the markets too, first as a recognition of real profits flowing to a company (Nortel), sector (Internet stocks), asset class (commodities), or geographic region (China, India, Brazil), and then as an extrapolation of this trend to infinity.

"It is not the strongest of a species that survives, nor the most intelligent, but the one most adaptable to change." - Charles Darwin

Trend-following systems are designed to find the most popular trends in the market place, and then ride those trends until they end, which they invariably do. These systems are not predictive; they will not tell you what toy, baby name, stock, or asset class will be most popular in a year or 3 years. Instead, they identify where the trends are currently, and adapt to changes. Some react to very short-term trends, like 2 or 3 month rotations in and out of stock market sectors, while others follow longer-term trends that occur over many months and years. Trends occur everywhere, from cotton to corn, stocks to silver, bonds to pork-bellies, and trend-followers trade them all.

Although trend-following systems differ from other investment strategies in a variety of ways, perhaps the most important difference is that all systems have an exit condition. In other words, all systems have a set of conditions that indicate that a trade is not working, and a strategy for exiting the trade in order to minimize losses.

A Scientific Approach

Trend-following systems are predicated on the human condition, but rooted in empirical data. Systems are developed by applying the scientific method to market pricing data, in much the same way as pharmaceuticals are (or should be) developed and tested before being brought to market. A drug development team applies a deep knowledge of human biochemistry and physiology to identify a chemical that may influence one or more important disease pathways. It is then hypothesized that the chemical will influence the presentation of a disease in a certain way, and this is tested empirically. A successful test is one that meets the expectations of the researchers at a certain level of statistical confidence, and with manageable side effects. Once a chemical is shown to work against a disease, researchers work to optimize dosage levels, delivery methods, etc. before attempting to bring the drug to market.

Credible practitioners of trend-following apply a similar approach to create and test their investment systems. Based on an understanding of human behaviour, and a mountainous body of empirical knowledge about the mechanics of markets, systems developers formulate a hypothesis and run tests against real historical market data to test this hypothesis. To avoid a minefield of potential biases, professional system developers test very simple systems and, if they deliver statistically and economically significant results, proceed to optimize their systems by testing the sensitivity of the system to small changes in the parameters. A robust system shows fairly consistent results over a wide band of parametric dispersion, but certain parameters will be more likely to deliver optimal results. Once the system is tested and optimized, it is ready to be put to work with real capital.

Developing A Proprietary System

Our team has been working on a trend-following system that will work well for unsophisticated investors with a meaningful time horizon of 5 to 50 or more years. Besides statistical and economic significance in testing, we limited potential strategies to those that meet the following criteria:

1. Invests only in public stocks or ETFs traded on North American exchanges.

2. Is simple enough to explain to non-professional investors.

3. Acknowledges the behavioral biases of regular investors and makes it easy to stick to.

Our efforts have led us to several promising systems, but we have focused on one strategy in particular which meets all of the above criteria, and passes tests of statistical and economic significance. Our system applies a combination of simple trend and moving average signals to a basket of global stock, bond, commodity, and real-estate ETFs. The moving average signals tell us whether each asset class is in a strong positive trend, or a weak or negative trend, while the momentum signals tell us where the trends are strongest. When markets show a weak or negative trend, our system sells out and goes to cash until a strong positive trend re-emerges.

Our systems show strong, consistent results across many time periods, and are resistant to time-period biases. We began by investigating results from several promising studies by Asness et al. (1997), Montier (2006), and Faber (2006, 2009) that show persistent outperformance by using momentum and moving average signals independently. The momentum strategies demonstrated extremely strong long-term performance, but are vulnerable to periods of large losses. The moving average strategies presented extremely consistent results with very infrequent, small losses, but returns were unspectacular. We decided to test a combination of the two systems to see if we could achieve strong, consistent returns with lower risk.

Montier (2007) builds on Asness' research to demonstrate that country stock market indices exhibit a very strong momentum effect. Country stock markets that have risen the most over the prior 12 months continue to do so in the following month, while countries that have risen the least in the prior 12 months continue to be weak. The following chart from Montier shows the power of a very simple strategy that invests in 16 of the top performing global stock markets over the past 12 months while going short the 16 worst performing stock markets, with holdings rebalanced monthly. This simple strategy delivered average annual returns of 16% going back to 1976.

Faber (2006, 2009) demonstrated the power of a simple moving average strategy to identify changes in trends among 5 different assets classes: US stocks, international stocks, REITS, commodities and bonds. The asset class allocations advocated by this researcher's strategy echo the allocations used by many of the top university endowments, such as those at Harvard and Yale. These endowments have a very small allocation to bonds, and a large allocation to real estate, global stocks, and alternative assets like commodities and timber. Due to their large size, however, these endowments are necessarily 'buy and hold' investors, as significant short-term changes to their allocations would cause noticeable market dislocations. Smaller investors can utilize Faber's moving average system, also called a Multi-Asset Tactical Asset Allocation system, to move to cash when market trends turn negative, mostly avoiding large losses.

The charts and tables below show how this strategy delivers very consistent returns with minimal losses. Investors would have received better returns than with stocks alone (11.3% vs 10.6%). More importantly however, investors would have experienced positive returns over 98% of all 12-month periods going back to 1973, and never lost more than 3.8% from their peak value at months' end. In contrast, stocks were positive only 76% of the time, and investors had to endure losses of 40% or more on their portfolio.

Given the strong performance of Asness' and Montier's simple momentum-based country allocation system, and the independent strong performance of Faber's simple multi-asset moving average system, we decided to investigate a strategy that combines these two systems. First, we tested a system that combines a momentum strategy with a moving average strategy using U.S. stocks. We tried this first because we had easy access to the necessary data and systems to run the test ourselves. We used a quantitative momentum model to select stocks, and combined it with a simple moving average model as a signal to move to cash. The quantitative model does quite well on its own, but the moving average overlay adds very significant value. Aside from delivering better absolute returns, the moving average overlay dramatically reduces periods of large losses (see blue line versus red and green lines in Chart 4 below).

Once we demonstrated that momentum works well in concert with a moving average signal in a strategy using individual stocks, we decided to test a similar strategy using allocations to global stock markets. This is a very simple and investable strategy because of the availability of ETFs that track the performance of over 35 global stock market indices. To implement this test we partnered with one of the most experienced systematic investing teams in Canada, Jason Russell and Nicholas Markos of Acorn Investments. Using MSCI country data going back to 1970, we tested a simple momentum model that invests in top-performing countries, and overlayed a simple moving average system to signal a change in the trend of global stocks. The following table and chart show the results of our non-optimized test.

Note that the Country Allocation System above, which combines the momentum model with the moving average signal, compounds at over 16% annually versus 6.5% for Buy and Hold. Further, the largest cumulative loss over the period is under 26%, less than half the maximum loss from a buy and hold strategy (56%). The longest period that investors are underwater on their investments is 40 months with the Allocation strategy, about half of the 78 month underwater period for Buy and Hold. Volatility is also less, at 14% annualized versus 15% for buy and hold. Any way you slice it, the Country Allocation System is superior to Buy and Hold.

The Country Allocation System in its current form was only applied to global stock markets. Our next step is to integrate our momentum/moving average system, which has demonstrated such excellent risk/return characteristics for stocks (Chart 4.) and allocations to countries (Chart 5.), into Faber's multi-asset model. We hypothesize that a momentum overlay will significantly enhance risk-adjusted returns versus the existing moving average system for each of the other 3 asset classes.

Maintain Your Lifestyle In Retirement

Buy and Hold is likely to underwhelm over the next decade or so, but investors have alternatives that may dramatically enhance their financial opportunities. Although a low-return environment for stocks is likely to also pull-down expected returns for the strategies we have described above, the historical risk-adjusted performance premium is likely to persist. For example, the current non-optimized Country Allocation System delivered a return premium over stocks of almost 10% per year from 1970 through 2009. Even assuming a 2% management fee, and some performance decay, it is reasonable to assume that this strategy might deliver 5% per year over a buy and hold strategy going forward.

The following charts demonstrate the massive impact that this return differential can have on a retirement plan. If we use a 4.6% expected real return for stocks as derived in this post, and assume that our strategy can deliver an extra 5% per year with slightly lower risk, then Chart 6. describes the potential difference in retirement income. The chart shows the income that can safely be withdrawn from a $2.5 million retirement portfolio under different return and risk assumptions.

Charts 7, 8, 9 and 10 use the 'Risk of Retirement Ruin' model described by Moshe Milevsky in his paper "A Sustainable Spending Rate without Simulation", and illustrate how the safe withdrawal rates in Chart 6. were modeled. The model uses lifespan assumptions for a healthy non-smoking male retiring on his 60th birthday, which is currently another 20 years.

Chart 6. Modeled safe annual income from a $2.5 million retirement portfolio for various strategies.

In conclusion, the money management industry, which is dominated by large banks and mutual fund companies, have a vested interest in preaching a buy and hold doctrine. They earn greater profits from keeping investors in equity mutual funds which pay greater fees to these firms rather than suggesting that investors attempt to earn superior returns by using active timing strategies.

We have presented a few alternatives to the buy and hold paradigm, and offered compelling reasons to specifically consider trend-following systems. Trend following strategies operate on the principal that humans are influenced by powerful social factors that manifest in trends in life and markets. The dominant investment paradigm embraced by almost all contemporary investors emphatically denies that this human condition exists, preferring to think of human decision makers as computational engines that operate independently and have a perfect understanding of the odds. By acknowledging the human condition, trend-followers have an opportunity to deliver out-sized performance over time. Further, this superior performance can have a dramatic impact on the lifestyle expectations of retirees.

Thursday, April 1, 2010

The previous post demonstrated that stock valuations are expensive as measured by Robert Shiller's Cyclically Adjusted PE Ratio. Stock valuations have been this expensive for only 25% of months going back to 1880, and expected returns from these levels are quite low by historical standards. This post will add further evidence to the valuation debate based on some complementary external analysis. In the next post, we will frame the low expected returns to a buy and hold strategy in terms of their impact on retirement income expectations. We will then, mercifully, also offer one potential alternative to a traditional buy and hold strategy that holds a much higher likelihood of retirement success.

More Evidence That Markets are Expensive

It is difficult to take our eyes off the perpetual motion machine that is the current stock market, but when we step back and look at the market in the context of long-term valuations, the conclusions are less exciting. We demonstrated in the previous post that stock valuations are in the top quartile of valuations since 1880, but Societe Generale's Dylan Grice points out in a recent piece that we are, in fact, in the top quintile of valuations, suggesting that stocks are even more expensive than we thought.

Grice concludes:

If only my crystal ball was clearer ... fortunately though, no crystal ball is needed to see that equity markets are expensive. According to Robert Shiller’s latest data, the S&P500 is back in its highest valuation quintile. The risk is there - as it always is - but the returns aren’t. So what do you do? Go take a holiday if you can.[sic]

The chart above shows the 10y real returns which have accrued to investors using each valuation quintile as an entry point. If history is any guide, those investing today can expect a whopping 1.7% annualised return over the next ten years.

Little Hope in Dividends, Either

Prieur de Plessis at Plexus Asset Management shows that markets are also expensive on the basis of dividend yield. The charts and tables below use Shiller's long-term stock market data to break the market's dividend yield down into quintiles and deciles. Note that the market's 10-year normalized dividend yield is currently 2.1%.

Although the research results offer no guidance as to calling market tops and bottoms, they do indicate that it would not be consistent with the findings to bank on above-average returns based on the current ten-year normalized valuation levels. As a matter of fact, there is a distinct possibility of some negative returns off current price levels.

Wither Profit Margins?

A recent Morgan Stanley piece published by their Australian macro team throws even more cold water on any forward returns enthusiasm you might have retained through the previous analysis. This team analyzed the proportion of aggregate economic productivity that has accrued to corporations' bottom lines over time. The chart below shows that, over the long-term, U.S. corporations have posted earnings representing about 2.5% of U.S. GDP, with a range of 1.5% to 3% during the postwar period.

Since 1994, corporations have been enjoying out-sized profit margins as a share of GDP. Even including the two major earnings baths over the past 10 years, S&P profits have averaged almost 4% of GDP over this period, suggesting corporations, and owners of corporations, have experienced a much larger share of total economic growth than at any other time since WWII. If we assume that corporate profit margins will normalize going forward, one must assume that earnings growth will be less than expected from a forecast of the recent past, even assuming trend economic growth (which I question emphatically).

Expect Lower Returns From Here

If we combine a reversion to the mean in valuations with a reversion to the mean in profit margins, forward expected returns look very gloomy indeed. Morgan Stanley's team concludes that a combination of these factors would model an expected real return to stocks of -7% to -8% over the next decade.

Previous posts on this blog have offered evidence that markets, and the economy, are too complex to enable accurate forecasting. Therefore,we are not attempting to forecast forward economic growth, or what the markets will do over the next few months. Instead, we are using new information with a strong proven correlation to the market's forward returns to adjust the likely range of returns from a buy and hold strategy going forward. A drunk driver may never crash, but the odds of a crash are certainly higher than for a sober driver. In the same way, expensive markets may get more expensive (witness 1994 - 2000), but the odds are long on that outcome.

Fortunately, investors can adopt strategies other than buy and hold that have a much higher probability of delivering strong, consistent returns. We have discussed systematic strategies before, and we will touch on them again in the next post, along with their potential to positively impact investors' lifestyles in retirement.

Finally, it is the long term investor, he who most promotes the public interest, who will in practice come in for the most criticism, wherever investment funds are managed by committees, boards, or banks.

For it is the essence of his behaviour that he should be eccentric, unconventional, and rash in the eyes of average opinion.

If he is successful, that will only confirm the general belief in his rashness; and if in the short run he is unsuccessful, which is very likely, he will not receive much mercy.

Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.

Disclaimer

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Macquarie Private Wealth Inc. (MPW). Every effort has been made to ensure that the contents of this document have been compiled or derived from sources believed to be reliable and contains information and opinions which are accurate and complete. However, neither the author nor MPW makes any representation or warranty, expressed or implied, in respect thereof, or takes any responsibility for any errors or omissions which may be contained herein or accepts any liability whatsoever for any loss arising from any use of or reliance on this report or its contents. Past performance may not be repeated. Information may be available to MPW which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for or an offer to buy any securities. Macquarie Private Wealth Inc. is a member of Canadian Investor Protection Fund and IIROC.

Unless otherwise indicated, this message is intended only for the personal and confidential use of the designated recipient(s) named above. If you are not the intended recipient of this message you are hereby notified that any review, dissemination, distribution or copying of this message is strictly prohibited. This communication is for information purposes only and should not be regarded as an offer to sell or as a solicitation of an offer to buy any financial product or service, an official confirmation of any transaction, or as an official statement of the entity sending this message. Email transmission cannot be guaranteed to be secure or error-free. Therefore, we do not represent that this information is complete or accurate and it should not be relied upon as such. All information is subject to change without notice.